Do you know about ‘Peer-To-Peer Lending (P2P) ? It is a method of debt financing that enables individuals to borrow and lend money without the use of an official financial institution as an intermediary. Peer-to-peer lending removes the middleman from the process but it also involves more time, effort and risk than the general brick-and-mortar lending scenarios. (Investopedia).
Most peer-to-peer lending involved business as it could help easily to get loan. Similar to crowdfunding, peer-to-peer (P2P) lending is a direct transaction between ‘peers’ or individuals and organisations who are willing to provide the money and you. P2P is commonly ideal for small businesses and operates like a bank loan but with less hassle. It’s becoming popular option for raising capital. You would apply for debt (loan) funding via an online portal with the money provided by peers. The P2P platforms facilitate the lending.
To access P2P lending you will need to visit their website. Once you’ve applied, different areas of your business will be examined such as turnover profit, trading history and accounts. Minimum loans can vary for P2P lending with some websites have no set amount which you might prefer if you only want to apply for a small amount.
ADVANTAGES OF USING PEER-TO-PEER LENDING
- The P2P Lending can be cheaper than banks especially if you have a good credit rating.
- Some websites have an open minimum loan which is ideal if you only want a small amount
- An alternative option for you if you’re struggling to get support from a bank. This is because banks often focus on what assets you have for insurance if you can’t repay the loan, whilst P2P lenders often interested in intellectual property and your business’s potential for growth
- You can often repay the loan early without any penalties.
- This form of lending can be useful for marketing as there is often a sense of community on P2P websites through active forums. Plus, various platforms will promote and write about successful or interesting cases of P2P lending.
- Unlike some crowdfunding platforms, you don’t have to declare your finances to the public
DISADVANTAGES USING PEER-TO-PEER LENDING
- Interest rates can be higher than banks, depending on your credit rating
- You usually have to pay a fee to the peer-to-peer company for arranging the loan.
- You might nor be able to find a loan if you have a poor credit score
- May not be suitable for every business
Peer-to-peer lending can be a great alternative for funding support as it’s relatively quick and you don’t have to publicise your finance. It’s an adapting industry with changes constantly happening, so it’s definitely worth keeping your eye on this funding option.
If you want to find best peer-to-peer lending company, check this link :-[ Asia Top 7 Peer To Peer Lending Platforms ] [ 4 Best Top Peer to Peer Lending in 2017 ]